Liquidator faces heavy legal costs

Legal costs from the fraud action brought by the liquidator to MMI Stockbrokers, Mr Tom Kavanagh, could be in excess of £500,000 (€634,870), sources said last night.

If the High Court grants Mr Kavanagh's application on Monday that the case be discontinued, it is likely the costs will be awarded against him. The money will come out of whatever funds are available for creditors. The seven defendants were represented by four legal teams.

The former managing director of MMI Stockbrokers and one of the defendants in the action brought by Mr Kavanagh, Mr Oisin Fanning, said after Mr Justice Kelly's ruling yesterday that he was "delighted justice has been done".

"My family, my colleagues and I have had this cloud of fraud allegations hanging over us for six months. Our client, Cater Allen, never ever alleged fraud in correspondence or in conversation.

"The trauma of losing the business I had built up over a decade was bad enough, but to be subjected to allegations of fraud was just too much.

"We are delighted that the ruling today and the statement by the liquidator that he intends to discontinue the proceedings against us have cleared our name."

There was no comment from the other directors named in the action, which Mr Kavanagh initiated in October 1999.

The collapse of the case leaves unanswered the question as to how the offshore firm Cater Allen came to be satisfied with the transactions at the heart of Mr Kavanagh's allegations. No explanation was given by the company to the liquidator during the period of the proceedings.

When The Irish Times contacted the Jersey based firm some weeks ago, the matter was referred to the parent company, Abbey National, but no comment could be secured from that company either.

When the fraud allegations were first made in the High Court, Mr Kavanagh said MMI Stockbrokers had assets comprising settled debts of £3.5 million and unsettled debts of £13 million. Settled debts are where the London counter-party to a deal has been paid but the client has not yet paid; unsettled debts are where the London party has not yet been paid.

It is expected it will take a year or more before Mr Kavanagh has secured all the debts to the company owed by its former clients. In a number of cases it is likely the issue of whether the client should pay the alleged debt to the liquidator will be fought out in the courts.